Company Commentary: Adobe's Valuation Amid AI Competition

3 months ago

Parkev Tatevosian, CFA

"Next, let's move on to Adobe, which is trading at a current market price of 356 and the current intrinsic value, the fair value I calculated is $418. I'm forecasting Adobe's free cash flow rises from 9.2 billion to 20 billion by 2034 and the weighted average cost of capital I'm using for Adobe is 12.34%. I estimated an after tax cost of debt of 6% and I calculated a cost of equity of 13%. The reason why Adobe stock is trading at such a low valuation is because investors are concerned about competition that's utilizing artificial intelligence to gain market share in the industry. All that being said, I believe Adobe's management team is capable enough and they have the resources to incorporate the features that customers like."

The speaker discusses Adobe's current undervaluation, highlighting a fair value of $418 versus a market price of $356. Although facing competitive pressures from AI-driven rivals, he expresses confidence in Adobe's management and its ability to innovate, making it an interesting prospect for further consideration.

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